Mississippi timber outlook dimmed by housing depression

With the U.S. housing market continuing in the doldrums, the outlook for demand and price improvement for Mississippi timber producers “is likely to be dismal for some time,” says James Henderson, assistant Extension professor for forest economics and management at Mississippi State University.

With the U.S. housing market continuing in the doldrums, the outlook for demand and price improvement for Mississippi timber producers “is likely to be dismal for some time,” says James Henderson.

“We need to see a rebound in housing demand, but industry projections are that it will be 2014 to 2016 before that occurs,” the Mississippi State University assistant Extension professor for forest economics and management said at the Mississippi Farm Bureau Federation’s Winter Commodity Conference at Jackson.

“Near term, there’s no indication of any huge resumption in demand for building materials, and the negative implication of that outlook for saw timber prices is clear.”

Construction trends are also changing, Henderson says. “Fewer single family houses are being built; instead, there are more multi-family rental properties, and these use a smaller amount of wood per family unit.”There are enough existing homes for sale on the market to act as an ongoing depressant for new home construction, he notes.

“The government assistance program for home buyers in 2009 helped bring down the inventory, but when it expired there was a wave of foreclosures and the inventory rose again. With a loss of 8 million private sector jobs, there was another round of foreclosures because unemployed people couldn’t pay their mortgages.”

Foreclosures are expected to continue at high levels in 2011.

Although the employment picture is improving marginally, Henderson says “we still have a ways to go to make up for 8 million lost jobs, and that will continue to be a drag on the housing market and U.S. and southern lumber production.”

Many producers continue holding timber

From 1994-2006, Mississippi’s timber growing stock increased by 23 percent, he says; but with mills consuming less “a lot of people are holding timber. There is a lot of supply building up, and saw timber prices are going to be depressed for some time.”

In 2008, demand for pulpwood “was like turning off a faucet,” Henderson says. “Nobody wanted it. There was a bit of a price spike in the very wet winter of 2009-10, when mills ran low on inventory. But once inventory was rebuilt prices fell again.“We’re now starting to see some price improvement as more goods are being produced, and there could be some improvement in demand for this sector over the next couple of years.”

From 2004 to the fourth quarter of 2010, pine stumpage prices have dropped from $49 per ton to a new low of $25.88.“Everything is tied to home construction,” Henderson says. “In 2006, home building volume was 2 million per year. By the spring of 2009, that had dropped by 80 percent tothe lowest level since 1959.

“Typically at the end of a recession housing construction picks up almost as sharply as it fell. In the most recent recession, we’re not seeing that resumption — housing starts are just bouncing around in the 500,000 to 600,00 range, and that’s not good for the timber industry.